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With everyone spending less, at least for now, CFOs are pressed to find ways to cope with uncertainty.
Scott Leibs, CFO Magazine
December 1, 2008
What number comes next: 40, 43, 44, 52…? Can't guess? Actually, no one can, but odds are good it won't make CFOs happy.
Those figures represent the percentage of Americans who say they plan to spend less money in the next 90 days than they did in the previous 90. Over the past four months (through September, based on a monthly survey conducted by ChangeWave.Com) that percentage has reached a two-year high, while the percentage who plan to spend more has reached a two-year low of just 18 percent.
That data adds yet one more piece of evidence to what is already a very convincing case for an impending consumer crisis. Confidence levels have plunged, holiday spending is expected to hit at least a 10-year low, and another stimulus package is in the offing.
None of this comes as news to CFOs, who for most of 2008 consistently cited weak consumer demand as their top worry in our quarterly Business Outlook survey. And it certainly won't be a revelation to CFOs in the restaurant business, where the recession took hold many months ago. As articles editor Edward Teach details in "Table Stakes," CFOs in the casual-dining industry are pulling out all the stops — cutting costs, dressing up storefronts, overhauling menus — to little noticeable effect. The best they can do is to hang on and trust that as a leading indicator they will also be among the first to feel the return of prosperity.
That requires a newfound talent for coping with uncertainty, a skill that all CFOs would do well to sharpen. In our cover story, "Future Tense," senior editor Vincent Ryan describes the many difficulties that companies now face in forecasting, which has never been much of a science but which now looks positively like a black art. One spot survey, in fact, finds many companies can't do it at all.
Amid the gloom there has been one bright spot: declining energy prices. These days, however, steep reductions in price feel as unsustainable as large increases once did. Energy hedging is one way to cope, and our new "fossil fuel beta" report ("What Goes Down Will Come Up"), developed in conjunction with Dartmouth's Tuck Business School, offers an intriguing way to frame your energy strategy.